Getting “closure” is important to people. Whether it’s mending a relationship, overcoming a hurdle in life, or finally attaining a life-long goal, closure is energizing. It lets one move forward in a restful state to start a new beginning with a clear frame of mind.
Closing your claims is a lot like this.
I’m always surprised when I review a prospect’s losses about how little attention is given to their historical open losses, especially with Workers’ Compensation. Many companies treat their ongoing WC obligations like a tax or re-occurring cost that they “just budget for.” They never get closure: They become burdened with the cost of collateral; they accept the claim administration costs; they very often just fail to manage the “legacy” or “old” cases. Simply, they never get closure and they become imprisoned by future financial burdens that could have been avoided.
How are Companies “Getting Closure”?
Creative companies devote resources to close the “old dog” claim files, they look for strategies to lower the costs of the claims before they entertain settlements, and they measure the cost of those legacy claims.
When clients ask my team for help in closing their legacy claims, we start with measuring their claim inventory. This can be done in a few quick ways. We look at:
- How many losses are open in each year
- What the reserves are, what the incurreds are
- What the state of jurisdiction is
“Low-hanging Fruit” Claims
My personal favorite tactic in trying to close legacy claims is to run a report that shows any claim that is open but without a payment in the last 90 days or more. You’d be surprised how many cases you can close from this very simple exercise. I’d encourage all risk managers and WC managers to conduct a similar search of their claim inventory on a quarterly basis. That’s what we call “low-hanging fruit” – claims that are just sitting open with no one watching the claim files.
If you have over 100 open legacy claims and run a similar report, there is a good chance you will find some files which can be immediately closed with little effort, “Hey claim rep, I noticed you haven’t paid anything on this file for 213 days – why is this open?” More often than not, you just closed a claim.
The Tough Ones
Not all open claims can be easily closed. If you have a large inventory of open claims in Texas and/or Ohio, you are in a jurisdiction where a claim closure exercise will be largely unfruitful. With the Medicare/Medicaid Set Aside Agreement responsibilities, a claim that once could be settled for $50,000, may now require $150,000 to settle. Also, you may have claims which simply shouldn’t be closed:
- Unreasonable demand
- Too “green of a file”
- Doesn’t have any financial impact to a company, etc.
Even though a claim can’t be easily closed, there are still steps you can take to mitigate the open claims.
I see so many companies “giving up.” They’ll say, “That’s a real bad case, let’s just see how it plays out.” Generally, we all know what happens to claims like that. However, there are many steps we can all do to mitigate the exposure on open cases.
How One Company Saved $800,000
Let’s take an example that I recently saw. A worker was out with a low-back injury. The case was 4 years old. The indemnity had been settled, but due to opioid usage the most recent Medicare Set Aside Agreement stated that over $1MM would be needed to settle the case to protect Medicare/Medicaid’s interests. Most people give up.
Our client and Willis decided to put an aggressive drug utilization review process in place. We were able to resolve the case with about $800K in savings.
This case may show the extremes and may be atypical, but it just shows what can happen when you don’t give up.
My team is actively helping our clients close out their old legacy claims. Whether we are trying to close a difficult claim or advocating for coverage for a client, Jeff Seibert, Willis’ National Technical Director for Casualty Claims, always says, “There is a way and we will find it.” Let those words echo in your ears every time you look at a claim. That theme of finding a way is essential to success.
So the question is, “Got Closure?” If the answer is no, don’t give up. Throw resources at the older cases. Engage closure experts. Implement creative measures to close cases. Measure your ROI on the results. Watch your collateral fall. Watch your administrative costs fall. There is a way and you will find it!